What do you call it when a bunch of companies collude to set prices, fix markets, close off competition, capture regulators, and bribe politicians?
We call it a “cartel,” right? Like the oil cartel. You have heard of that term before, “cartel”?
Who here has heard of the term ‘banking cartel’? Oh, we don’t hear that term.
We don’t talk about the banking cartel.
We don’t talk about the information cartel.

All right… how many of you here in Seattle work for one of the information cartel companies?
Uh-huh… Big smile on the box.
Cartels are the most insidious when we don’t talk about them, when they hide in the shadows but in plain view.
The banking system, payments, finance are the biggest cartels in the world.
Nobody calls them a cartel because they’re the biggest cartel in the world.
They own all of the media channels, politicians and laws; that makes it easy for them to get away with crimes.
In fact, mega-crimes.
Just after the crisis in 2008, instead of some bankers going to jail, they set up an additional layer of crime: a series of fraudulent foreclosures called robo-signing.
Do you remember that crisis? One of the lead companies in that space, the biggest robo-signer of all, was run by a guy called Steven Mnuchin.
Anybody know what that guy does today? He is the Treasury Secretary of the United States.
Apparently he can do that job without running it from a jail cell…
He copped a deal, didn’t have to accept any wrong-doing, and then quickly got a cozy job.
Now he has the ultimate level of protection, which is qualified immunity. That is how cartels work.

First they capture the market.
Then they capture the regulators (who are always, of course, about “consumer protection”).
The regulator is there to protect against “evil things” happening. For example, money laundering.
If you don’t have a banking license, no money laundering for you!
But if you do have a banking license… Well, I mean we must protect “the system.” There will be a fine.
Usually the fine will be less than what you made actually money laundering. You will get away with it, right?

Of course, we don’t want to see any financing of terrorists except for the ones we do through the State Department, the CIA, or the banks…
— in which case, those are good people.

We have the regulators and they are captured.
That kind of situation encourages behaviours that are fundamentally parasitic.
When capitalism fails in this particular mode, when you end up with full-blown crony capitalism, it is also known as kleptocracy.
“Kleptocracy” is from the Greek word ‘klepto,’ which means thief, and ‘krátos’ which means power.
The thieves are in power, literally. That is kleptocracy, when the most parasitic behaviours get rewarded.
It’s actually not about competing. When you run a business at that scale, it is not about competing.
It is about finding the biggest pipe, the biggest flow, of money in the economy, straddling that pipe, sticking a straw in it, and sucking as much of that money out as you can.
You establish yourself as a parasitic leech on a flow of money, which describes the entire banking system.
The idea is, you find a job that requires an intermediary; it requires an intermediary because you made sure to buy some lawyers, some Congress people to write a law, to make it require an intermediary (specifically, you).
Then you stick a straw into that flow of money and start extracting rents. It’s called rent-seeking behavior.
You take half a percentage point here, half a percentage point there…
We have this wonderful thing called “fractional reserve banking.”
If you try to describe it to a five-year-old, they would
probably turn around and say, “That sounds like fraud!”
They would be right.
Of course, there is a big difference between fraud and something that is “legal.”
It depends on which politicians you buy to make sure it is considered legal.

We have these parasitic companies, sitting on top of these flows of money, extracting rent.
They create this rent-seeking behavior. In doing so, they disrupt competition by buying and suing competitors, or even better making sure that competitors can’t keep up with regulation.
They capture regulators to keep the competition at bay. In doing that, they have built a cartel.
Then they make sure nobody calls it a cartel. Instead, we call it “the shining example of American capitalism.”
The end result of this would be appalling in its own self. Obviously, this is not a good model to run an economy.
It is not a competitive model to run an economy.
But who does it really hurt? Does it matter if a bunch of people get obscenely rich without having to compete?
Does it really matter? Well, to most people in a semi-functioning thriving economy, it doesn’t matter.
That is the magic. Until money breaks, part of the benefit of freedom, the premium of liberty, is the ability to not give a shit about how any of it works.
You don’t need to worried about these details; you live in a free country.
You’re free to instead pay attention to Sunday football, enjoy your life, and have another hot dog.
But when money stops working, suddenly all of it comes crashing back.
You have to start learning some new vocabulary. At the end of 2008, we all had to start learning.

“Grandma, what is a credit default swap?” “I don’t know.
Let’s ask Uncle John. He has a degree in finance.”
He doesn’t know either. Half of the people in the business didn’t now what a credit default swap was, how it worked, or what was hiding behind it.
Suddenly, everybody needs to know what a credit default swap is, because apparently it chewed a giant hole right in the middle of the economy.
When money stops working, everything stops working.
You are on a crash course to learn whose fault it was.

There are two alternative histories. In one of these histories, there were some oopsies. Some things happened.
People made some bad mistakes, but- you know… They are just people trying to do their job.
In the end, it was mostly the fault of greedy homeowners who didn’t read the fine print carefully enough, to realize they were buying a ballooning interest rate.
They had the audacity to want to own a home.
Because of these greedy people, the real-estate market had an oopsie. But don’t worry!
The irresponsible people had their homes taken away from them. The banks got some cash infusions, which we don’t want to talk about too much…
But everything was fixed, we passed some laws and it will not happen again. Really, it was just a blip.
In the next ten years, we will just rebuild everything. Everybody is happy.
Now we have a roaring economy that is working great!
That is the first story.

The second story may be familiar to more of you, who are probably in the middle class.
They robbed us blind, strip-mined the economy, had an orgy of fraud, and knew exactly what they were doing.
There are mountains and mountains of evidence that the least competent RICO lawyer could use to unravel the entire thing and send five hundred people to jail for twenty-five years.
That was ignored because we must “save the system.” Otherwise, the system would crush us all.
We dumped more than $10 trillion in an orgy of quantitative easing into the banks, which they did not use to stimulate any part of the economy, but instead to blow another giant bubble into real-estate, into the stock market, into bonds, into student loans, into sub-prime auto insurance, into every part of the economy.
Meanwhile, they made sure those cops beat the shit out of anyone who had the audacity to protest as part of Occupy Wall Street.
That didn’t work. They turned protest into a crime.
They didn’t just damage the economy, they raped the rule of law in this country and destroyed the justice system so they could get away with it.

We have come full circle today. Ten years later, where are we? Ten trillion dollars in debt, ten more giant bubbles.
It will happen again, because a system like that is fragile and corrupt; architected in such a way as to reward and encourage that kind of behavior.
In a system of incentives where the penalty is less than the profits you made by committing the crime, that is legal immunity.
That is a very loud signal, in a system of capitalism, that says, “Do it again. Only this time, leverage more!”
“We could probably squeeze out another ten years.”
A lot of solutions have been proposed to this.
The problem with destroying institutions within a society:
many people whose livelihoods get functionally destroyed, will rage.
That rage gets misdirected. There is an old adage of the rich guy who has ninety-nine cookies the middle-class having one cookie, and the rich guy saying to them, “Watch it.”
“That brown guy will take your cookie.” That is the oldest trick in the game.
I’ll just give you one little piece of information.
One of the houses stolen by Steven Mnuchin’s robo-signing firm belonged to the guy
— I won’t name him because they don’t deserve to be named —
who sent seventeen bombs to Congress people just a couple of weeks ago.
That guy was robo-closed by Steven Mnuchin and decided to turn his rage against immigrants, and Democrats, for I don’t know what.
The point is, when you have that kind of destruction in a society, when you destroy the rule of law and create rage among people, they don’t know where to turn.
What you get is violence, extremism, bigotry, hatred and a desperate desire to find someone to blame.
Of course, you can’t really blame those guys because they are behind very tall walls with very good security.
The guillotines are out of fashion.
They tried that in France, but we can’t do it again because we are now a civilised country.

So what do you do?
Protest? That ends in an orgy of violence by militarised police, exactly what police have always done.
You can’t do that. Occupy? That was tried. Again, an orgy of violence. A lot of young voters tried apathy.
“I don’t give a shit. These old people fucked it up. I will just go and play my game and ignore all of this.”
That doesn’t work out very well.
Trying to become part of the parasitic class by clawing your way to just escape from the middle class?
Well, there is a tide of shit coming out behind you and it is moving faster than you are.
The middle class is sliding backwards so fast that, while you try to scramble out of it, you are still backsliding, so that doesn’t work.
How do we fix this problem? The first thing we need to do, isidentify why this keeps happening.
In my opinion, looking at this from a technology perspective, architecture is at the core of the problem.
An architecture of hierarchy and centralisation is responsible for this.
Parasitic behavior gets rewarded because there are centralised flows of money that someone can tap into.
We have taken the traditional model of commerce — where you visit, interact, and trade with other people around you in your community, a system of peer-to-peer commerce — and we converted it into a system that I call a peer-to-corporation- to-corporation-to-peer system.
When I pay my butcher, Visa, Chase, and three other banks get involved.
They all stick a little straw in that flow. By the time the money reaches my butcher, it is a lot less.
How can you make a system like that work? It is absurd.

You would need to create a sense of apathy, combined with the convenience of waving a piece of plastic.
You would need to create a dark cloud over cash (“terrorists!”) and pretend it is something we should get rid of, because people might use it to evade taxes.
Of course, the people who evade taxes use corporations, very expensive lawyers, and actually get away with it.
But the butcher might evade some taxes if we use cash, so we’ll eradicate cash…
That hierarchy is not just poisonous for the system of commerce that we have.
It is not just our banking system.
It becomes a haven for parasites because the very architecture itself concentrates power, creates a reward system for parasitic behavior.
This is now happening with information cartels.
“Let’s take everyone’s identity, put it in a big pot, put Mark Zuckerberg on top of the pot, and…”
“Oops – we fucked up our electoral system…”
“But we have cat videos!”
“Hey, democracy is dying-” “But we have cat videos!”
That is okay, is it?
The information cartels, the payment cartels, and the electoral system are so centralised, that the Secretary of State in Georgia can run in his own election and steal it at the same time.

We have electronic voting machines making it so quick that you can count the votes incorrectly in an hour, instead of counting them correctly over three days.
We have convenience. You can tap on the screen to vote, but the system changes your vote to something else, and it is still counted, instantly!
Convenience! And democracy dies a little.
We have the liberty to ignore most of these remote negative side-effects that arise out of centralisation.
In this country we have an incredible amount of economic momentum and a dirty deal with the Saudis to sell oil only for U.S. dollars.
That ensures we will continue to have low interest rates and the rest of the world will buy treasury bonds.
We can maintain a lifestyle of convenience.
The illusion that this will continue to work, allows us to accept this behaviour and not try too hard to change it.
We’re not in a panic. It’s not an emergency.

It was in 2008, but that was “fixed.” Don’t worry.
It will not happen again in 2019, and it won’t be three times bigger because we didn’t actually fix anything.
The same symptoms still exist, but don’t worry.
While you’re not worrying, someone in Argentina is worrying because their currency just crashed 45%.
They are experiencing that this year in an accelerated fashion, in an environment where they can’t simply outsource their debt to the rest of the world in exchange for oil and war.
They suffer the consequence immediately.
It is happening in Venezuela, in Brazil again.
It is happening in Turkey, in Ukraine, and in dozens of other countries.
Until now, in all of these countries, when your esteemed leader said your currency was crashing and your economy was dying, they tried to claim that it was not because of systemic corruption throughout the entire system, or the parasitic behaviour of hierarchies sucking off the middle class, feasting on the carcass of the economy.
They claimed it was sabotage by the foreigners next door, or some other external threat.
And not only is it your patriotic duty to use the currency, but it is also your patriotic duty to not leave the country.
Of course, refugees do all the time, so apparently they are not patriotic… There was no exit.
Until 2008, there wasn’t really an alternative.
Holding U.S. dollars as a foreign currency, hoarding gold, or putting it under your mattress, that is easy for a government to stop, to break down and censor.
They can confiscate your gold, raid your house.
If you are seen exchanging hard(er) currency, like foreign currency, with others, you will get shot.
You won’t just have a misdemeanor fine.
These countries can take entire populations hostage on these hyerinflation orgies.

Then something happened in 2008: Bitcoin.
For the first time in modern history, we had an option.
That option isn’t just a separate currency. It is a currency that can’t be easy confiscated, that can easily be transmitted across borders, that can be used as a lifeboat by people who can’t physically exit the country.
They can exit the economy virtually, trading in another currency right where they are, creating a parallel micro-economy in their community which becomes connected to other little lifeboats.
Life can continue past the crisis. They don’t have to go down with the sinking boat of state to be patriotic.
That is happening today in Venezuela, in Argentina and Turkey. Before that, in Cyprus and other places.
It is happening again and again, as people discover they have some other options.
Today, not many people can do that. It requires a level of literacy, numeracy, and technological confidence that is not yet present in the masses.
But think about what happens in twenty years when some dictator decides to take an entire economy hostage, and 25% of the population says, “[Bye]! I’m taking my money out now.”
Taking their money out isn’t the act of investment like we see here in the United States.
People say, “Let’s invest in bitcoin,” as if it is some kind of stock. “Let’s buy low, sell high.”
“Let’s make lots of money, get rich quick!”
The act of exit is to say, “I will take my productive capital, my labor, my services my products, and I will only make them available for this currency.”
“I am simultaneously entering a new economy, trading with other people who are with me, and I have exited.”
I have withdrawn my participation, my collaboration, with the system that is broken.”
On that basis alone, this is a technology that will change the world. But that’s not what it’s all about.

You hear this term, you would have read it on this article and you’ll hear it again when you talk about cryptocurrencies, when you talk about open blockchains with other people.
They will say, “decentralization.” To most people, that doesn’t mean anything. It is a really vague word.
It doesn’t have any impact in their lives. Let’s decipher what decentralization means.
Decentralization means peer-to-peer, edge to edge, end to end, and removing intermediaries.
It means reconnecting with each other so that we can have transactions, interactions.
Not just with money, but also with trust, corporate governance, and other things that could be enabled through smart contracts.
We can do these things without intermediaries. What is the role that intermediaries serve?
In most cases and markets, the fundamental purpose of an intermediary is two-fold:
To provide a way for two parties (such as a buyer and a seller) to engage in any kind of trusted transaction to find each other.
They create conditions where people can find each other.
That is what Uber does. The drivers are out there; you’re out there. What is it we’re doing?
They are helping you found each other. That is a good function, but we could also do that with just software.
Why exactly, in this day and age, do we need to create these double-ended markets where people need to find each other?
The other reason is trust. I can’t trust the driver unless there is some way of validating their reliability, through some kind of review or previous experience.
The driver can’t trust that I will actually pay them.
Trust, until 2009, was a function that could only be done by intermediaries acting in a hierarchy of oversight.
“I trust this intermediary because it is overseen by another intermediary, who is overseen by another…”
The theory goes, eventually overseen by someone who is a representative, in some elected body, where I have some influence within the consent of the governed.
The intermediary works for me, through my representatives, and are trusted because they have oversight.
In practice, that is not what happens.
In practice, the intermediary gets powerful enough to start buying the intermediaries around and above them.
They become bigger and bigger, start sucking and extracting more rent out of the system, until eventually they buy the people doing the oversight.

Now the Congressman works for them, and I am not a part of the system anymore.
It is no longer peer-to-peer. It is peer- to-corporation-to-corporation-to-peer.
We’re out.

Somebody asked me recently,
“If a homeless person on the street asks you for a donation, how do you pay with bitcoin?”
“You can’t pay them with bitcoin!”
Actually, I can and I have. I takes fifteen minutes.
I must teach them how to install a wallet, where to spend it, and how to find other people.
It becomes an exercise of slightly patronizing education, of course, but sometimes it is worth it.
I will also give them some cash because I’m not a monster.
If you decide you will only tip or give money to homeless people in bitcoin, you’re a douchebag.
I mean, it’s really quite simple…
But you can give them bitcoin. My question back to this person was,
“Tell me, how do you pay the homeless person with a credit card?”
How many of you are carrying that much cash, that you use for any purpose other than tipping?
We don’t. We have outsourced our commerce through these intermediaries. I have a simple question for you.
In this artcile today, how many of you have a point-of- sale merchant system that can accept a credit card?
Almost none of you can take my credit card, none of you can take a payment.
You can use intermediaries. You will need to stack them all together and make a little pyramid of intermediaries.
I can put PayPal here, PayPal will take it from Visa, Visa will take it from your Chase bank account so the payment goes through Chase, Visa, PayPal, Chase, to me. Wait, how did Chase get in there twice?
Fuck!
I should be in that business.
They didn’t actually do anything. What do they do? They moved some bits on the internet!
We have been moving bits on the internet for twenty-five years, practically for free!
How did they figure out that this costs 2% of my transaction?
The invention of Bitcoin is about decentralization. It removes intermediaries.
If you understand anything about the internet, all the great things the internet did come down to one word: disintermediation.
I need to put a classified ad in a newspaper to sell my furniture to my neighbor?
Oh no, I don’t. Bye-bye, newspapers.
Oops, they’re gone! An industry that existed for hundreds of years, now a hollow shell that does info-tainment.
Several other industries have gradually fallen to this powerful effect of disintermediation.
Disintermediation is important because it allows you to do two things: shorten the distance between buyers and sellers, and remove all the points of friction or control.
It means lower costs, faster service, a more direct interaction between the service provider and the person consuming it.
We can start behaving like human beings that interact with each other.
if I buy from someone directly, I know who they are. I don’t need three intermediaries of trust in between.
Disintermediation remove these.

The other insidious problem of intermediaries is control. They will not just take a cut of everything they are involved with.
They will start telling you what you can and cannot sell, to whom you can and cannot sell, in which country you can and cannot send money.
That might be okay if they shared my moral principles and decided, ‘No, we shouldn’t be sending 40% of our budget to Lockheed Martin and General fucking Dynamics to bomb people around the world. Maybe we should do something else.’
But no, they don’t have my moral principles, or probably your moral principles either.
They think it’s very wrong to send money to WikiLeaks, which hasn’t been convicted of doing anything wrong – ever!
But it’s perfectly all right to send a contribution to the Alabama chapter of the KKK…
The fundamental problem in all of our platforms today is that they have become gatekeepers as intermediaries.
The side effect is not just the 2% cost of every transaction; it is the erosion of democracy.
It is the destruction of all other institutions we used to have control over.
We no longer have choice, we no longer have voice. What is left when you have no choice, no voice? Exit.
We can exit the hard way, try to get fifty people into a tiny boat and across the Mediterranean, a man-made crisis.
But exit the slightly less hard way, is saying “I’m opting out. I am leaving your centralised, parasitical system.”
“I am choosing to use decentralized platforms for my money, my payments.”
“Perhaps, in the future, for my speech, my publishing, my corporate organisation, and other trusted interactions.”
Trust used to be a function of hierarchy. It no longer is. Trust is now a protocol.
When we have the technological tools to convert trusted institutions into a peer-to-peer protocol, we take back that control. We remove the intermediaries. We cut off the flows.
If you want to stop a parasite, you must stop feeding it first. That is what this is about. That is why decentralization matters.
When I talk to people in Argentina, Greece, Cyprus, Turkey and other places around the world where they are not part of the 5% population that has American’s advantages, they understand.
They have already seen the consequences, two or three times in one generation.
They have seen what happens when money fails; when institutions get corrupted, eroded, and finally destroyed, by these parasitic organisations.
These parasitic organizations keep arising because nothing has changed in the fundamental architecture.
If the architecture is a pyramid, someone will climb to the top.
Changing people at the top doesn’t change the architecture. Corruption will flow upwards. They are just ‘doing their job.’

I have met plenty of bankers, a lot of them are nice people (especially female ones) trying to pay their mortgages.
Most of them are debt slaves too. They are contributing to the inexorable momentum of a machine that only moves in one direction, without guidance for morality, because it doesn’t have morals.
It’s a corporation. It is not immoral, it is amoral. “How do we increase our profit margin this week?”
“Well, we could sell facial recognition technology to law enforcement.”
“After all what are they going to do with it?”
“Hey, didn’t Oakland PD murder a whole bunch of their own fucking citizens, even though they were unarmed?”
“Yes, but if they violate the Constitution, they will probably be in violation of our Terms of Service.”
“So we can shut them down.”
Who the hell do you think you’re kidding?
Really? The people who make these decisions are not evil people, they are moving inexorably.

They have seen this is a big pipe of money that wants to throw millions or billions of dollars into facial recognition, surveillance, tasers, pepper spray, drones that bomb you with pepper spray from the sky…
They think, ‘Money!’ They stick a straw in it. They are making decisions on a local context.
You cannot stop that by saying, “Be better, Amazon! Be better people.” “Don’t be evil!”
What a great slogan… You can’t fix it.
We have to change the fundamental architecture.
The reason these crimes can be done by large corporations is because of centralisation.
They have taken the convenience of the one-click buy, the profile share, and all the micro-violations of privacy.
They have built a massive information cartel that delivers billions of dollars, that allows them to centralise and become parasites. There are actually quite benevolent right now.
But we know where this is going. It will not get better.
It will not magically resolved our itself until we change the fundamental architecture.
That’s the message of the ‘Ulterior States’ movie we just watched, the message that Bitcoin brings.
The reason it is so strongly resisted by those who run the current architecture is because it says,
“We don’t need your permission.”
“Your regulation isn’t working.”
“You can’t scale to solve the problems of this planet.”
“At a very fundamental level, your architecture is wrong.”

The architecture we want is peer-to-peer, flat, decentralized, and end-to-end.
Innovations are at the edges, without permission, and are part of everyone’s experience.
That’s the architecture we want: peer-to-peer. It matters in money, corporate governance, law, and voting.
But first and most importantly, we have to starve the parasites.
The first thing we need to break is the cartel of money. We do that by exiting, by using peer-to-peer money.